What are the essential components for online profitability?

How do you create an online future that delivers for consumers but also makes compelling business sense? Two decades since supermarkets first started selling online in the UK, this question remains one of grocery’s toughest nuts to crack.

As we set out in our special on online profitability this week, there is no shortage of ideas for how online grocery could be run more profitably. But there is still little agreement on which of those represent genuine best practice, and which ideas make for lovely user experiences but are commercially unviable.

Take online delivery charges. A more robust, disciplined approach to charging for online delivery is considered as non-negotiable by some; others see it as a dicey gamble that risks alienating consumers used to ‘free delivery’ promises and which could undermine efforts to build up scale. Similarly, click & collect is hailed by some as a vital, economically sane component while others see it as merely niche.

It’s not unusual to see disagreement over the best business model, nor is it necessarily the case that there should only be one model. The wide range of views and approaches on offer is part of what makes online so thrilling – but the noise can also make it fiendishly difficult to formulate a clear strategy.

The current obsession with ever faster delivery times is one such example. As retailers and start-ups fall over themselves to dazzle inner-London shoppers with the latest super-fast service, how many of these options really respond to genuine consumer need? How many of these trials will ever produce insights that can be applied at scale? And how much does this focus on speed result in other, crucial elements being neglected? Having the lowest substitution rate or the most punctual service won’t generate as many headlines as being able to deliver a selection box of gourmet doughnuts at 20 minutes’ notice, but it’s those fundamentals that profitable growth is built on.

‘Retail is detail’ has long been the mantra of the conscientious shopkeeper. As profitability becomes an ever more urgent consideration, it must become the rallying cry of those working in online grocery too.